Can town officials cut $12M from upcoming debt exclusion tally?

Thursday

Aug 3, 2017 at 5:31 PMAug 7, 2017 at 9:24 AM

Matt Mallio @actonbeacon

With Lexington facing a tax hike to pay for almost $100 million in building projects, town officials think they have a way to save taxpayers over $12 million on the projects through an accounting maneuver.

Ways to reduce the level of the debt exclusion vote was discussed at a joint meeting between Board of Selectmen and the Appropriations, Capital Expenditure, and School Committees Wednesday evening. Officials debated what projects should be part of the debt-exclusion vote, and how projects would be paid for, whether they were part of the vote or not.

Town Manager Carl Valente said that current estimates of the amount of the debt exclusion stand at $97 million. This figure includes the Hastings School, the Lexington Children's Place or LCP, the annex for the Lexington Community Center, the new and temporary Fire Stations, Lexington High School heating and air conditioning and two properties purchased on Pelham Road and Bedford Street.

Solution: a special town fund

It was the last two properties that became the subject of debate. Appropriations Committee Acting Chair John Bartentein said he believed that the two properties, which total about $12.5 million should be removed from the debt exclusion package. In addition, Bartenstein proposed that they should be paid for out of the town's $28 million Capital Stabilization Fund.

"Those are two items that are a little out of the ordinary for a debt exclusion," said Bartenstein.

This was because of voter choice. Debt exclusion votes involve voter choice to pay for the project, cancel it, or find a less expensive option.

“But it basically is voter choice,” said Bartenstein.

In this case, the properties have already been purchased and the town is not going to sell them back.

"So we're not really giving the voters a choice on whether or not to acquire the properties," said Bartenstein. "We're giving them a choice of whether to pay for it within the levy or without the levy, and that's a little awkward."

An option, he said was to pay for the properties using the existing Capital Stabilization Fund. Currently, he said the two properties are being paid for with short-term bonds with the expectation they would eventually roll over and become long-term bonds. The interest rate for the last long-term bonds the town took out in February, were about 3 percent. The money held in the Capital Stabilization Fund is earning about one-percent.

The 2 percent difference in interest on $12.5 million translates to $250,000 a year, with potentially millions more over the time of the approximately 30-year life of the bond.

Town manager urges caution

Valente said his office has not modeled the scenario and cautioned against it.

"Using the cash now does limit our future flexibility," said Valente.

He said the numbers -- such as the cost of Hastings -- were still just estimates and could change and that money may be needed in the future.

Members of various boards said they "wholeheartedly" supported the idea for many reasons many of which involved reducing the debt exclusion to be put before town meeting.

"The idea of going to the citizens with something like $84.4 million, as opposed to a $97 million debt exclusion I think is a very important factor to take into mind," said David Kanter, Vice-Chair and Clerk of the Capital Expenditure Committee.

"I think that's something that we just need to do," said Alan Levine, who serves on the Appropriations Committee.

Broad support, but not decision

After a short break while the committees and board discussed the idea, committee chairs offered their support.

Jill Hai, Chairwoman of the Capital Expenditures Committee, said the most persuasive reason for proceeding with taking the two items off the debt exclusion and using the Capital Stabilization Fund, had to do with future planning.

"It will give us better certainty in the model going forward," said Hai. "This cost will not to be carried anywhere in the model."

Barrtenstein and School Committee Chairman Alessandro Alessandrini said their committee also was in favor of the idea. Board of Selectmen Chairwoman Suzie Barry said the Selectmen would not offer a position at this time because they did not have a full board.

Valente said he would run a new model involving the model and that in September they would receive new numbers to work with. Barry said the Board of Selectmen will take up the matter at their Aug. 14 meeting.